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Hard Money Lenders

Direct Lenders – A direct lender draws from large amounts of pooled capital to fund loans. They get their money from wall street, hedge funds, etc. Typically, direct lenders are larger lenders with immediate access to unlimited funds.

Broker – A broker outsources their deals to a direct lender for underwriting and eventual funding. The problem here is that brokers are at the mercy of the direct lender’s timeline and are typically more expensive as they add their fees in addition to what the direct lender charges.

For example, I charge 10% and 3 points. Brokers in my area charge up to 14% and 5 points because they get funding from someone like myself and then add their profit to our fees.

Syndicators – Once presented with a deal, they then raise the capital needed to fund it and often from multiple sources. Syndicators can cause painful delays as they raise needed capital after the deal is already underwritten. And, just as in the above example, their funding source may not come through at the last minute. I know of borrowers being told the day before, or even the day of, closing that their funds will not be available after all.

One reason syndicators run into trouble is that they often borrow from personal friends or family members. At the time of your closing, these friends or family members may have loaned to someone else or simply changed their mind about lending. Don’t go to closing without absolute certainty that your funds are available.